The latest debate in digital music is music streaming services’ impact on paid download purchases. In response to new data shared by NPD Group’s Russ Crupnick, Spotify says on-demand music services do not cannibalize music sales.

“There is other data out there to prove the exact opposite of that report,” a Spotify spokesperson told FastCompany.com. The spokesperson pointed to a Billboard interview with the Orchard’s Scott Cohen in which the co-founder claimed Spotify was actually boosting sales. “We are not seeing any cannibalization,” he said.

What exactly did Crupnick say in his presentation at Digital Music Forum in New York on Wednesday? According to CNET’s Greg Sandoval, Crupnick used a phrasing to imply a causal relationship between online listening and purchasing. Digital Music News’ post on the presentation did not have exact quotes, but used words like “leads to” and “cannibalization.

In other words, listening to product A results in an X% decrease in purchases, while listening to product B results in a Y% increase in purchases. (Crupnick later told Sandoval he was speaking only about U.S. consumers. Since Spotify has not launched in the U.S. it does represent on-demand services that are part of this discussion.)

In many cases, market research reflect merely a correlation between listening and buying. There could be a number of reasons to help explain why on-demand streaming services are related to lower purchases. Age and income are two obvious explanations. Younger consumers with less disposable income and less propensity to buy recorded music seek out free streaming. MySpace Music’s young audience may simply be less likely to buy music than Pandora’s older, iPhone-using, wealthier audience. The services may not be shaping purchasing habits, consumers may be choosing services based on their characteristics.

But it appears NPD presented the data to imply a causal relationship between free services and paid downloads. And that is likely to stir up the emotions of record label executives who want to access models that discourage freeloading.


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